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Halo Collective Inc. Reports Record First Quarter Results

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Halo Collective Inc. (“Halo” or the “Company“) (NEO: HALO), (OTCQX: HCANF), (Germany: A9KN) today announced its financial and operational results for three months ending March 31, 2021 (“Q1 2021”). The Company reported record revenues of $9.9 million for Q1 2021, a 123% increase compared to the previous year. This included the sale of over 5.2 million grams of cannabis products principally to dispensaries in Oregon and California, a 253% year over year increase. Organic revenuei growth was 62%, the highest organic growth recorded in the Company’s history.  The Company also reported a gross profit of $2.0 million, an increase from $(172.2k) for the three months ended March 31, 2020 (“Q1 2020”). The adjusted gross profit was $2.2 million (compared to $117.4k in Q1 2020). The reported gross margin in Q1 2021 was 19.7% in comparison with -3.9% in Q1 2020.  Complete results are reported in the Company’s consolidated financial statements for the three months ended March 31, 2021 (the “Consolidated Financial Statements”) and associated management’s discussion and analysis (the “Q1 2021 MD&A”).

In response to the Company’s record results, CEO and Co-Founder Kiran Sidhu commented, “Now, in 2021, we will begin to reap the rewards that we initiated with the change in our product range in 2020. We exceeded our own sales forecast by almost $1.0 million, and we believe a further increase in sales is possible. With the positioned start-up of Bar-X Farms, the first major sales by Bophelo, the start-up business with FlowerShop* which recently sold out its initial launch of 1,200 units in a few hours, the expected sales by Canmart, and the three planned dispensaries in the Hollywood area, we remain on target to achieve our overall revenue target of $75.0 million.”

Philip van den Berg, CFO and Co-Founder continued, “The Q1 results demonstrate we are on target to the 2021 guidance previously communicated. When we released our financial statements for the year ended December 31, 2020, we provided guidance of annual revenues of $75 million for the fiscal year ended 2021 and positive EBITDA by the fourth quarter of 2021. Our first quarter showed that the core business is growing fast, and margins are improving across all operations.  With the exception of Oregon cultivation and potentially California dispensary assets, the Company will be slowing down our acquisitions which should significantly reduce our corporate costs, in turn leading the Company to profitability.”

Halo Collective will host a conference call and audio webcast with Kiran Sidhu, CEO & Co-Founder, Philip van den Berg CFO, and Katie Field, President, at 4:15 PM Eastern Daylight Time on May 18, 2021.

A live audio webcast will be available for registration.

Webcast Details

DateMay 18, 2021
Time4:15 p.m. EDT / 1:15 p.m. PDT 
PresentersKiran Sidhu, CEO & Co-Founder Philip van den Berg, CFO, and Katie Fields, President
Registration Linkhttps://halocollective.clickmeeting.com/q1-2021-earnings-call 
Join Via Mobile Application: Event ID: 199-175-134
Latest Corporate PresentationDownload here

Q1 2021 FINANCIAL RESULTS

Revenue

Revenues in Q1 2021 were $9.9 million compared to $4.4 million in Q1 2020, a 123% increase. Total sales were 5,230,019 grams (Q1 2020: 1,481,756 grams), a 253% increase. The average mix price was $1.90 (Q1 2020: $3.00 per gram), a 36.7% decline, explained by a higher proportion of lower priced flower, pre-rolls, trim and fresh frozen in comparison with Q1 2020. Organic revenue growth was 62.4%.

The Company’s subsidiaries ANM Inc. (“ANM”), Mendo Distribution and Transportation LLC (“MDT”), and Halo Winberry Holdings, LLC (“Halo Winberry”) all reported strong performances in the period under review. ANM reported revenues of $4.4 million, a 11.5% increase over Q1 2020. MDT reported revenues of $1.9 million, a 346% increase over Q1 2020.  Coastal Harvest reported revenues of $3.4 million, an 88.6% increase over Q1 2020.  Halo Winberry reported revenues of $3.4 million. Halo Winberry’s results were not included in the three months ended March 31, 2020.

ANM

In Q1 2021, ANM, the owner of the Company’s facility in Oregon, sold 1,320,420 grams of shatter, cartridge oil, live resin, tinctures and gummies, flower, and pre-rolls (Q1 2020: 1,438,451 grams), an 8.2% decrease. Sales of oil and extracts were 516,412 grams (Q1 2020: 535,725 grams), a 3.6% decrease. The wholesale price of oils, extracts and edibles increased by 15.6% to $6.47 (Q1 2020: $5.60 per gram). Flower sales in Q1 2021 were 705,970 grams (Q1 2020: 833,037 grams), a 15.3% decrease. The wholesale price of flower increased by 15.7% to $1.24 per gram (Q1 2020: $1.07 per gram). Pre-roll sales were 98,038 grams (Q1 2020: 69,689 grams), a 40.7% increase. The wholesale price of pre-rolls increased by 94.6% to $2.06 (Q1 2020: $1.06 per gram). The average mix-price across all products was $3.35 per gram equivalent (Q1 2020: $2.76 per gram), a 21.4% increase.

MDT

In Q1 2021, MDT, the owner of the facility in Ukiah, sold 193,374 grams of distillate, live resin, gummies and pre-rolls (Q1 2020: 37,263). The average price decreased 4.6% to $9.90 (Q1 2020: $10.38).

Halo Winberry

In Q1 2021, Halo Winberry, a fully owned subsidiary of the Company, received conditional approval to execute the asset purchase agreement to acquire the assets of Herban Industries OR LLC (“Winberry”), and therefore consolidated and recorded the results of Winberry under Halo Winberry. Consequently, Halo Winberry sold 2,529,599 grams of oil and extracts, shatter, live resin, edibles, flower, pre-rolls and trim at an average mix-price of $1.35. Prices ranged from $15.78 per gram for oil, $11.55 for live resin, $0.15 for extracts (balm, lotions), $0.86 for edibles, $1.70 for flower, $9.70 for pre-rolls to $0.14 per gram for trim.

Gross Profit

The Company reported a gross profit of $2.0 million (Q1 2020: gross loss $172k). Adjusted for the loss on biological assets, gross profits were $2.2 million (Q1 2020: $117k). The reported gross margin was 19.7% (Q1 2020: -3.9%). Adjusted for gains and losses on the value of biological assets the gross margin was 22.1% (Q1 2020: 24.0%).

The month of March was specifically strong with an aggregate gross margin across operating units of 27.9%.  Broken down by subsidiaries, ANM was 23.6%; MDT was 29.7%; Coastal Harvest was 31.8%; and Halo Winberry was 33.6%.

Summary consolidated statement of income – expressed in US dollars

For the 3 months ended:

March 31, 2021

March 31, 2020

Revenue

$

9,939,103

$

4,449,098

Reported gross profit

1,955,776

(172,180)

Gross margin

19.7%

-3.9%

Unrealized fair value (gain) loss on growth of biological assets

(167,111)

Realized fair value (gain) loss included in the cost of inventory sold

411,905

289,553

Impairments

951,813

Gross profit excluding biological assets and impairments

2,200,570

1,069,186

Gross margin

22.1%

24.0%

Net loss

(9,067,681)

(8,609,704)

Comprehensive loss

(8,570,121)

(8,703,482)

Net loss per share (basic and diluted)

$

(0.01)

$

(0.03)

Weighted average number of outstanding common shares, basic and diluted

1,610,099,430

277,418,561

Total assets

$

133,903,098

$

47,508,892

Long-term financial liabilities

20,147,988

8,661,381

Working capital

22,499,128

13,278,652

Operating Expenses & EBITDA

The loss before interest, tax, depreciation & amortization and adjusted for non-cash items (“adjusted EBITDA”) was $6.0 million (Q1 2020: loss $4.3 million). Although gross profits increased, operating expenses increased by $2.1 million to $9.3 million, a 29.5% increase (Q1 2020: $7.2 million). Cash based operating expenses increased by $1.5 million to $8.5 million, a 21.3% increase (Q1 2020: $7.0 million).  As the Company continues to execute its business plan, operating expenses are projected to level off and could potentially decrease.

The first-time contribution of Halo Winberry added $870k to operating expenses. Excluding the first-time consolidation of Halo Winberry, operating expenses increased by 17.4%, which was anticipated.  Halo Winberry contributed operating profit in Q1 2021. Closing costs in relation to the Halo Winberry acquisition included in professional expenses were $401, 025. The acquisition met the definition of a business combination. Under IFRS 3, closing costs for a business combination are expensed.

Salary expense increased with the onboarding of new employees associated with the various acquisitions over the past year. Professional expenses decreased 15.8%.  Sales and marketing expenses doubled to $1.5 million (Q1 2020: $749k). Sales and marketing expenses increased at MDT following rapid sales growth, and at the corporate center following increased expenses for social media and other marketing service providers. This is in line with Company’s strategy to increase brand awareness for the Company’s core brands such as Hush but also in respect of the launch of new brands such as FlowerShop*.  In March 2021, the Company terminated its California direct sales force and transferred the accounts to distributor’s sales force which converted a fixed cost to a variable cost and reduced management overheads.

Overall operating expenses increased year over year by 29.5% and on a like for like basis, excluding acquisitions, increased by 17.4%.  This is compared to revenues which increased 253% overall, and 62.4% on an organic basis.

Cash

As of March 31, 2021, the Company had unrestricted cash available in the amount of $10.3 million and working capital in the amount of $22.5 million.  Cash used in operations in Q1 2021 was $9.4 million, cash used for investing was income of $1.0 million, and cash raised from finance activities was $15.9 million. Total cash inflow was $7.6 million.

On February 2, 2021, the Company closed an overnight marketed public offering of units of the Company for aggregate gross proceeds of $7.2 million (Note 17 Condensed Interim Consolidated Financial Statements). On February 19, 2021, the Company closed an overnight marketed public offering of units of the Company for aggregate gross proceeds of $9.1 million (Note 17 Condensed Interim Consolidated Financial Statements).

Corporate M&A Activity

In Q1 2021, the Company progressed on five mergers or acquisitions.  For details, please refer to Note 14 in the Consolidated Financial Statements, which are available on SEDAR. These transactions include one cultivation company, being the assets of Winberry, and two dispensaries (SDF11 LLC and ZXC11 LLC) and the associated management companies (Black & Crimson LLC and POI11 LLC).

With Halo Winberry, the Company purchased secured debt owed to Evolution Trustees Limited. On January 16, 2020, Halo Winberry, a wholly owned subsidiary of the Company, received conditional approval from the Oregon Liquor Control Commission to complete the Company’s proposed purchase of certain assets of Winberry as previously disclosed.  The Company acquired fixed assets of $104k, and working capital of $1.4 million. Intangible assets included the Winberry licenses and Winberry brands. As at March 31,2021, the carrying value of intangible assets was $6.5 million (December 31, 2020: Nil).

On March 2, 2021, the Company issued 23,690,385 Halo common shares (“Halo Shares”) as a pre-closing non-refundable deposit in relation to the closing of the acquisition of SDF11 LLC, a dispensary license applicant on Franklin Avenue, LA.  Additionally, Halo issued 118,650,349 Halo Shares to close on the acquisition of the associated management company, Black & Crimson LLC.

On March 2, 2021, the Company issued 23,690,385 Halo Shares as a pre-closing non-refundable deposit in relation to the closing of the acquisition of ZXC11 LLC, a dispensary license applicant in Santa Monica, LA.  Additionally, Halo issued 118,650,349 Halo Shares to close on the acquisition of the associated management company, POI11 LLC.

Moving Forward in 2021

The Company is actively reducing operating expenses to improve EBITDA margin going forward in 2021. These cost reductions are occurring across most of the Company’s entities including corporate, ANM, Halo Winberry, MDT and Coastal Harvest.  At the corporate center, the Company plans to reduce legal cost by hiring an in-house General Counsel and believes costs will decrease naturally with reduced Merger & Acquisition activity. In addition, at ANM and Halo Winberry, costs are expected to improve through restructuring and consolidation of the two companies. The Company also experienced farm improvements in Q1 2021 that are not yet capitalized and will decrease naturally now that the farm is ready for 2021 planting. At MDT, overheads will continue to decrease now that the entire salesforce has been outsourced to a third-party distributor. Below the Company has outlined a detailed strategic plan to grow revenue and improve margins across all markets.

Oregon

Halo anticipates undertaking the following activities in an effort to grow and improve the Company’s business in Oregon:

  • Bring in house manufacturing of all key SKUs to lower the wholesale price and increase profit margins;
  • Launch new flavor SKUs of Winberry Farms distillate cartridges and infused pre-rolls;
  • Launch Hush 5-piece vegan gummies as well as re-formulate and update current gummy offerings, specifically the one-piece gummy;
  • Bring all distribution in house rather than using third-party distributors to increase efficiency in distribution and lower cost;
  • Increase purchasing of third-party flower to increase availability and sales of flower products;
  • Expand the offering of third-party brands to the Company’s existing dispensary customer base, helping to increase distribution revenue;
  • Acquire indoor cultivation and more outdoor and greenhouse cultivation to increase the Company’s access to quality raw materials and increase consistency of the supply chain; and,
  • Establish a central cannabis processing unit in Southern Oregon to reduce processing costs from over $100 per pound to an anticipated target of $60 per pound.

California

Halo anticipates undertaking the following activities in an effort to grow and improve the Company’s business in California:

  • Complete move to full-service distribution partner, Greenstone, increasing immediate store sales;
  • Launch Hush live resin pucks and carts into the California market to fill void of our current third party distribution partner;
  • Launch FlowerShop* Bouquet Packs and Bud Vase flower products to expand higher price offerings;
  • Re-launch Winberry Farms distillate vape products into the California market;
  • Launch the Company’s retail footprint by opening three retail dispensaries in the City of Los Angeles;
  • Identify opportunities to expand or build retail dispensary store clusters in Southern California and in the Bay Area;
  • Build large, scalable indoor cultivation footprint by commencing buildout the UVI indoor facility; and
  • Commence operations of Triangle Canna Corporation (“Triangle”) with at least one outdoor grow cycle in partnership with Green Matter. Halo owns 44% of Triangle and has a favorable off take agreement which is expected to contribute revenue and gross profit by November 2021 which has not been included in the Company’s forecast.

International

Halo anticipates undertaking the following activities in an effort to grow and improve the Company’s business internationally:

  • Finalize Good Agricultural and Collection Practices (“GACP”) certification at the cultivation site operated by Bophelo Bioscience & Wellness (Pty) Ltd. (“Bophelo”), which includes the installation of security perimeter fencing and camera systems, completion of ablutions and a cafeteria, completion of post-harvest processing facilities, and the review, approval and implementation of 245 Standard Operating Procedures. Bophelo is currently in the final stage of obtaining approval with less than 10% of the certification requirements remaining to complete;
  • Continue to aggressively scale growing capacity at Bophelo via site development and build-out of 40,000 square feet of Cravo Green Houses by the end of October and the build-out of an additional 60,000 square feet of Cravo Green Houses by the end of the year;
  • Complete the build out of a small extraction facility at Bophelo to conduct training of local personnel in the handling of explosive gases (butane/propane) and handling of flammable liquids (alcohol);
  • Develop and implement a business plan to secure sales to patients at Canmart Ltd. (“Canmart”) in the United Kingdom, while also starting the planning and build out of a 5,000 square foot European Union Good Manufacturing Practices certified facility at Canmart for processing of cannabis;
  • Evaluate the further development of the Canmart facility to also encompass cultivation and/or manufacturing oils and concentrates subject to local regulations; and
  • Close the acquisition of Kushbar retail dispensaries in Alberta and continue to add profitable dispensaries. This transaction is expected to be completed in July 2021.

Non-IFRS Financial Measures

Organic Revenue, Adjusted Gross Profit, EBITDA and Adjusted EBITDA are non-IFRS financial measures that the Company uses to assess its operating performance and does not have any standardized meaning prescribed by IFRS. Management defines Organic Revenue as Revenue excluding revenue from Halo Winberry. Management defines Adjusted Gross Profit as Gross Profit excluding fair value gains in biological assets, impairment of inventory and non-reoccurring costs. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management defines Adjusted EBITDA as EBITDA adjusted for share-based compensation and payment, foreign exchange loss, share based payments for goods and services, accretion expense, fair value on intangible, values on biological assets and marketable securities.  These non-IFRS measures are provided to assist management and investors in determining the Company’s operating performance. The Company also believes that securities analysts, investors and other interested parties frequently use their non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. For a reconciliation of Adjusted Gross Profit, EBITDA and Adjusted EBITDA please refer to “Non-IFRS Measures” in the Q1 2021 MD&A.

Cannabis

IM Cannabis Reports 2023 Financial Results

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im-cannabis-reports-2023-financial-results

TORONTO and GLIL YAM, Israel, March 28, 2024 /PRNewswire/ — IM Cannabis Corp. (the “Company” or “IMC“) (NASDAQ: IMCC) (CSE: IMCC), an international medical cannabis company, announced its financial and operational results for the year ended December 31, 2023, the highlights of which are included in this news release. All figures are reported in Canadian dollars. The Company’s full set of consolidated audited financial statements for the years ended December 31, 2023 and 2022 (the “Annual Financial Statements“) and accompanying management’s discussion and analysis (the “Annual MD&A“) can be accessed by visiting the Company’s website at https://investors.imcannabis.com/, and its profile pages on SEDAR+ at www.sedarplus.ca, and EDGAR at http://www.sec.gov/edgar.

FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2023

  • Revenue decreased to $48.8 million for the fiscal year ended December 31, 2023 (compared to $53.3 in 2022), representing a decrease of 10%.
    • Primarily due to negative currency fluctuations and the impact of the Israel-Hamas war on the Company’s operations.
  • Revenue decreased to $10.7 million for the three months ended December 31, 2023 (compared to $14.5 million in 2022), representing a decrease of 26%.
    • Primarily due to the interruption on the Company’s supply chain caused by the Israel-Hamas war and the Company discounting certain outstanding inventory at lower prices.
  • Gross profit increased to $9.8 million for the fiscal year ended December 31, 2023 (compared to $9.2 million in 2022), representing an increase of 7.5%
  • Gross profit decreased to $0.8 million for the three months ended December 31, 2023 (compared to $2.6 million in 2022), representing a decrease of 68%
    • Primarily due to the interruption on the Company’s supply chain caused by the Israel-Hamas war and the Company discounting certain outstanding inventory at lower prices.
    • The Company’s fair value adjustment was approximately $1 million for the fiscal year ended December 31, 2023 (compared to $2.1 million in 2022).
  • G&A expenses decreased to $11 million for the fiscal year ended December 31, 2023 (compared to $21.5 million in 2022), representing an decrease of 49%
  • G&A expenses decreased to $3.3 million for the three months ended December 31, 2023 (compared to $9.8 million in 2022), representing a decrease of 66%
    • Primarily due to the impairment on Y2022 and restructuring and HC adjustments in 2023.
  • Selling and marketing expenses decreased to $10.8 million for the fiscal year ended December 31, 2023 (compared to $11.5 million in 2022), representing an decrease of 6%
  • Selling and marketing expenses decreased to $2.8 million for the three months ended December 31, 2023 (compared to $3.1 million in 2022), representing a decrease of 10%
    • Primarily due to a decrease in share based compensation payments and a restructuring of the Company’s personnel.
  • Net Loss from continuing operations for the fiscal year ended December 31, 2023 was $10.2 million, as compared to $24.9 million in 2022.
  • Net Loss from continuing operations for the three months ended December 31, 2023 was $3.5 million, as compared to a Net Loss of $9.6 million in the fourth quarter of 2022.
  • Diluted Loss per Share for the fiscal year ended December 31, 2023 was $0.74, compared to a loss of $3.81 per Share in 2022.
  • Diluted Loss per Share for the three months ended December 31, 2023  was $(0.25), compared to a basic loss of $)2.94( per share and a diluted loss of $)3.55( per share in for the three months ended December 31, 2022.
  • Cash and Cash Equivalents as of December 31, 2023, was $1.8 million, compared to $2.4 million as of December 31, 2022. 
  • Total assets were $48.8 million as of December 31, 2023, compared to $60.7 million as of December 31, 2022, representing a decrease of 20%.
    • Primarily attributed to an inventory reduction of about $6.6 million, a reduction in other current assets of $1.8 million and a reduction of non-current assets of about $3.5 million
  • Total Liabilities were $35.1 million as of December 31, 2023, compared to $36.9 as of December 31, 2022, representing a decrease of about 5%. 
    • Primarily attributed to a reduction in trade payables of $6.1 million.
  • Operating expenses decreased to $22.6 million for the year ended December 31, 2023 (compared to $40 million in 2022), representing a decrease of 43%
  • Operating expenses decreased to $6 million for the three months ended December 31, 2023 (compared to $13.3 million in 2022), representing a decrease of 55%
  • Adjusted EBITDA1 decreased to $8 million for the year ended December 31, 2023, (compared to $11.5 in 2022), representing a decrease of 30%
  • Total Dried Flower sold in 2023 was approximately 8,609 kg with an average selling price of $5.14 per gram (compared to approximately 6,794kg, with an average selling price of $7.12 per gram in 2022).
    • Primarily due to increased competition within the retail segment and the Company discounting certain outstanding inventory at lower prices.
  • Total Dried Flower sold in the fourth quarter of 2023 was about 2,082kg with an average selling price of $4.52 per gram (compared to about 2,334kg with an average selling price of $5.19 per gram in 2022).
    • Primarily due to increased competition within the retail segment and the Company discounting certain outstanding inventory at lower prices.

The Annual Financial Statements include a note regarding the Company’s ability to continue as a going concern. The Annual Financial Statements do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. For more information, please refer to the “Liquidity and Capital Resources” and “Risk Factors” sections in the 2023 Annual MD&A.

Management Commentary

“IMC Germany delivered accelerated growth in 2023, growing 181% from $252K in 2022 to $709K in 2023. During this time, IMC Germany was #1 in sales per stock keeping unit and posted the highest growth against its competitors in the German market.2 With the regulatory rescheduling of cannabis in Germany set to occur effective April 1st, the Company hopes to continue its growth in the market as the market evolves,” said Oren Shuster, Chief Executive Officer of IMC. “In addition, as we are constantly looking for opportunities to maximize shareholder value, we are hopeful that our potential reverse merger with Israel-based Kadimastem Ltd., a clinical cell therapy public company traded on the Tel Aviv stock exchange under the symbol (TASE: KDST) will proceed as expected, which we believe will create significant value for the shareholders.”

“As previously warned and as expected, unfortunately, the Israel-Hamas war had a negative impact on our fourth quarter 2023 results, which weighed on our full year results. Due to the ongoing conflict, there was a 6% decrease in our yearly revenue. Coupled with our fourth quarter of 2023 inventory reduction, the war caused our fourth quarter gross profit to decrease by 68% as compared to the fourth quarter of 2022. However, our gross profit for 2023 increased by 7.5% to $9.8 million as compared to last year,” said Uri Birenberg, Chief Financial Officer of IMC. “Partially offsetting these declines, we were able to reduce our operating costs in the fourth quarter of 2023 by 55% as compared to the fourth quarter of 2022, ending the year with a 43% reduction in our operating costs as compared to last year, as we leaned further into our goal of active cost management.”

Conference Call 

The Company will host a Zoom web conference call today at 9:00 a.m. ET to discuss the results, followed by a question-and-answer session for the investment community. Investors are invited to register by clicking here. All relevant information will be sent upon registration.

If you are unable to join us live, a recording of the call will be available on our website at https://investors.imcannabis.com/ within 24 hours after the call.

Non-IFRS Measures

This press release makes reference to “Gross Margin” and “Adjusted EBITDA”, which are financial measures that are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are provided as complementary information to the Company’s IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should neither be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.

For an explanation of how management defines Gross Margin and Adjusted EBITDA, see the 2023 MD&A.

We reconcile these non-IFRS financial measures to the most comparable IFRS measures as set out below:

About IM Cannabis Corp.

IM Cannabis Corp. (Nasdaq: IMCC) (CSE: IMCC) is an international cannabis company that provides premium cannabis products to medical patients in Israel and Germany, two of the largest medical cannabis markets. The Company has exited operations in Canada to pivot its focus and resources to achieve sustainable and profitable growth in its highest value markets, Israel and Germany. The Company leverages a transnational ecosystem powered by a unique data-driven approach and a globally sourced product supply chain. With an unwavering commitment to responsible growth and compliance with the strictest regulatory environments, the Company strives to amplify its commercial and brand power to become a global high-quality cannabis player.

The IMC ecosystem operates in Israel through its commercial relationship with Focus Medical Herbs Ltd., which imports and distributes cannabis to medical patients, leveraging years of proprietary data and patient insights. The Company also operates medical cannabis retail pharmacies, online platforms and logistical hubs in Israel that enable the safe delivery and quality control of IMC products throughout the entire value chain. In Germany, the IMC ecosystem operates through Adjupharm GmbH, where it distributes cannabis to pharmacies for medical cannabis patients. Until recently, the Company also actively operated in Canada through Trichome Financial Corp and its wholly owned subsidiaries, where it cultivated, processed, packaged, and sold premium and ultra-premium cannabis at its own facilities under the WAGNERS and Highland Grow brands for the adult-use market in Canada. The Company has exited operations in Canada and considers these operations as discontinued.

Disclaimer for Forward-Looking Statements

This press release contains forward-looking information or forward-looking statements under applicable Canadian and United States securities laws (collectively, “forward-looking statements“). All information that addresses activities or developments that we expect to occur in the future are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “believe”, “plan”, “estimate”, “expect”, “likely” and “intend” and statements that an event or result “may”, “will”, “should”, “could” or “might” occur or be achieved and other similar expressions. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. In the press release, such forward-looking statements include, but are not limited to, statements relating to: the Company leaving the Canadian cannabis market to pivot its focus and resources to achieve sustainable and profitable growth in its highest value markets, Israel and Germany; the impact of the Israel-Hamas war on the Company, including its operations and the medical cannabis industry in Israel; the timing and impact of the partial legalization of medicinal cannabis in Germany, including, the Company having it “all in house”, the Company being positioned to take advantage of the partial legalization, the Company’s growth in 2024, the market growth for medicinal cannabis in Germany, and the stated benefits of the Company’s EU-GMP processing facility and an EU-GDP logistics center; the Company to host a teleconference meeting as stated; and the Company’s stated goals, scope, and nature of operations in Germany, Israel, and other jurisdictions the Company may operate.

Forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to: the Company’s ability to focus and resources to achieve sustainable and profitable growth in its highest value markets; the Company’s ability to mitigate the impact of the Israel-Hamas war on the Company; the Company’s ability to take advantage of the partial legalization of medicinal cannabis in Germany; the Company’s ability to host a teleconference meeting as stated; and the Company’s ability to carry out its stated goals, scope, and nature of operations in Germany, Israel, and other jurisdictions the Company may operate.

The above lists of forward-looking statements and assumptions are not exhaustive. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated or implied by such forward-looking statements due to a number of factors and risks. These include:  the failure of the Company to comply with applicable regulatory requirements in a highly regulated industry; unexpected changes in governmental policies and regulations in the jurisdictions in which the Company operates; the Company’s ability to continue to meet the listing requirements of the Canadian Securities Exchange and the NASDAQ Capital Market; any unexpected failure to maintain in good standing or renew its licenses; the ability of the Company and Focus Medical (collectively, the “Group“) to deliver on their sales commitments or growth objectives; the reliance of the Group on third-party supply agreements to provide sufficient quantities of medical cannabis to fulfil the Group’s obligations; the Group’s possible exposure to liability, the perceived level of risk related thereto, and the anticipated results of any litigation or other similar disputes or legal proceedings involving the Group; the impact of increasing competition; any lack of merger and acquisition opportunities; adverse market conditions; the inherent uncertainty of production quantities, qualities and cost estimates and the potential for unexpected costs and expenses; risks of product liability and other safety-related liability from the usage of the Group’s cannabis products; supply chain constraints; reliance on key personnel; the risk of defaulting on existing debt; risks surrounding war, conflict and civil unrest in Eastern Europe and the Middle East, including the impact of the Israel-Hamas war on the Company, its operations and the medical cannabis industry in Israel; risks associated with the Company focusing on the Israel and Germany markets; the inability of the Company to achieve sustainable profitability and/or increase shareholder value; the inability of the Company to actively manage costs and/or improve margins; the inability of the company to grow and/or maintain sales; the inability of the Company to meet its goals and/or strategic plans; the inability of the Company to reduce costs and/or maintain revenues; the Company’s inability to take advantage of the partial legalization of medicinal cannabis in Germany; and the Company’s inability to host a teleconference meeting as stated.

Please see the other risks, uncertainties and factors set out under the heading “Risk Factors” in the Company’s annual report dated March 28, 2024, which is available on the Company’s issuer profile on SEDAR+ at www.sedarplus.ca and Edgar at www.sec.gov/edgar. Any forward-looking statement included in this press release is made as of the date of this press release and is based on the beliefs, estimates, expectations and opinions of management on the date such forward looking information is made. The Company does not undertake any obligation to update forward-looking statements except as required by applicable securities laws. Investors should not place undue reliance on forward-looking statements. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

1 Earnings before interest, taxes, depreciation, and amortization (“EBITDA“) and Adjusted EBITDA. These measures do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS“) and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-IFRS measures provide investors with a supplemental measure of the Company’s operating performance and therefore highlight trends in Company’s core business that may not otherwise be apparent when relying solely on IFRS measures. Management uses non-IFRS measures in measuring the financial performance of the Company.

2 Based on reporting by Insight Health’s as of December 31, 2023.

 

Company Contact: 

Anna Taranko, Director Investor & Public Relations
IM Cannabis Corp.
+49 157 80554338
[email protected]

Oren Shuster, CEO
IM Cannabis Corp.
+972-77-3603504
[email protected]

 

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$    1,813

$        2,449

Trade receivables

6

7,651

8,684

Advances to suppliers

936

1,631

Other accounts receivable

7

3,889

3,323

Inventory

9

9,976

16,585

24,265

32,672

NON-CURRENT ASSETS:

Property, plant and equipment, net

10

5,058

5,221

Investments in affiliates

15c

2,285

2,410

Right-of-use assets, net

12

1,307

1,929

Deferred tax assets, net

17

763

Intangible assets, net

11

5,803

7,910

Goodwill

11

10,095

9,771

24,548

28,004

Total assets

$       48,813

$       60,676

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Trade payables

14

$        9,223

$       15,312

Credit from banks and others

13

12,119

9,246

Other accounts payable and accrued expenses

15

6,218

6,013

Accrued purchase consideration liabilities

5

2,097

2,434

PUT Option liability

2,697

Current maturities of operating lease liabilities

12

454

814

32,808

33,819

NON-CURRENT LIABILITIES:

Warrants measured at fair value

17

38

8

Operating lease liabilities

12

815

1,075

Credit from banks and others

394

399

Employee benefit liabilities, net

16

95

246

Deferred tax liability, net

19

963

1,332

2,305

3,060

Total liabilities

35,113

36,879

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:

20

Share capital and premium

253,882

245,776

Translation reserve

95

1,283

Reserve from share-based payment transactions

9,637

15,167

Accumulated deficit

(249,145)

(239,574)

Total equity attributable to shareholders of the Company

14,469

22,652

Non-controlling interests

(769)

1,145

Total equity

13,700

23,797

Total equity and liabilities

$       48,813

$       60,676

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands

Year ended December 31,

Note

2023

2022

 *) 2021

Revenues

21

$       48,804

$       54,335

$       34,053

Cost of revenues

21

37,974

43,044

25,458

Gross profit before fair value adjustments

10,830

11,291

8,595

Fair value adjustments:

Unrealized change in fair value of biological assets

(315)

6,308

Realized fair value adjustments on inventory sold in the year

(984)

(1,814)

(8,570)

Total fair value adjustments

(984)

(2,129)

(2,262)

Gross profit after fair value adjustments

9,846

9,162

6,333

General and administrative expenses

21

11,008

21,460

17,221

Selling and marketing expenses

21

10,788

11,473

6,725

Restructuring expenses

1

617

4,383

Share-based compensation

20

225

2,637

5,422

Total operating expenses

22,638

39,953

29,368

Operating loss

(12,792)

(30,791)

(23,035)

Finance income

7,006

6,703

23,544

Finance expenses

(3,671)

(1,972)

(673)

Finance income (expense), net

3,335

4,731

22,871

Loss before income taxes

(9,457)

(26,060)

(164)

Income tax expense (benefit)

18

771

(1,138)

500

Net loss from continuing operations

(10,228)

(24,922)

(664)

Net loss from discontinued operations, net of tax

25

(166,379)

(17,854)

Net loss

(10,228)

(191,301)

(18,518)

*)       Reclassified in respect of discontinued operations – see Note 25.

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands, except per share data

Year ended December 31,

Note

2023

2022

 *) 2021

Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:

Remeasurement gain on defined benefit plans

38

59

21

Exchange differences on translation to presentation currency

(894)

(1,238)

858

Total other comprehensive income that will not be reclassified to profit or loss in subsequent periods

(856)

(1,179)

879

Other comprehensive income that will be reclassified to profit or loss in subsequent periods:

Adjustments arising from translating financial statements of foreign operation

231

(246)

530

Total other comprehensive income (loss)

(625)

(1,425)

1,409

Total comprehensive loss

$     (10,853)

$    (192,726)

$      (17,109)

Net loss attributable to:

Equity holders of the Company

$      (9,498)

$    (188,890)

$      (17,763)

Non-controlling interests

(730)

(2,411)

(755)

$       (10,228)

$    (191,301)

$      (18,518)

Total comprehensive loss attributable to:

Equity holders of the Company 

$        (10,648)

$    (190,162)

$      (16,357)

Non-controlling interests 

$        (205)

(2,564)

(752)

$        (10,853)

$    (192,726)

$     (17,109)

Earnings (loss) per share attributable to equity holders of the Company from continuing operations:

22

Basic earnings (loss) per share (in CAD)

$              (0.74)

$          (3.13)

$            0.02

Diluted loss per share (in CAD)

$              (0.74)

$          (3.81)

$           (3.62)

Loss per share attributable to equity holders of the Company from discontinued operations:

Basic and diluted loss per share (in CAD)

$        (23.17)

$          (3.08)

Loss per share attributable to equity holders of the Company from net loss:

Basic earnings (loss) per share (in CAD)

$              (0.74)

$        (26.3)

$          (3.06)

Diluted loss per share (in CAD)

$              (0.74)

$        (26.98)

$          (6.7)

*)       Reclassified in respect of discontinued operations – see Note 25.

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Canadian Dollars in thousands

Share capital and premium

Treasury Stock

Reserve from share-based payment transactions

Translation reserve

Accumulated deficit

Total

Non-controlling interests

Total
equity

Balance as of January 1, 2021

$     37,040

$              –

$       5,829

$       1,229

$   (33,001)

$     11,097

$       1,513

$     12,610

Net loss

(17,763)

(17,763)

(755)

(18,518)

Total other comprehensive income

1,385

21

1,406

3

1,409

Total comprehensive income (loss)

1,385

(17,742)

(16,357)

(752)

(17,109)

Issuance of common shares, net of issuance costs of $3,800

195,259

195,259

2,948

198,207

Purchase of treasury common shares

(660)

(660)

(660)

Exercise of warrants and compensation options

4,293

4,293

4,293

Exercise of options

1,053

(920)

133

133

Share-based compensation

7,471

7,471

7,471

Expired options

32

(32)

Balance as of December 31, 2021

237,677

(660)

12,348

2,614

(50,743)

201,236

3,709

204,945

Net loss

(188,890)

(188,890)

(2,411)

(191,301)

Total other comprehensive income (loss)

(1,331)

59

(1,272)

(153)

(1,425)

Total comprehensive loss

(1,331)

(188,831)

(190,162)

(2,564)

(192,726)

Issuance of treasury common shares

660

660

660

Issuance of shares, net of issuance costs of $178

6,818

6,818

6,818

Exercise of options

992

(659)

333

333

Share-based compensation

3,767

3,767

3,767

Expired options

289

(289)

Balance as of December 31, 2022

245,776

15,167

1,283

(239,574)

22,652

1,145

23,797

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Canadian Dollars in thousands

Share capital
and
premium*)

Reserve from
share-based
payment
transactions

Translation
reserve

Accumulated
deficit

Total

Non-controlling interests

Total
equity

Balance as of December 31, 2022

245,776

15,167

1,283

(239,574)

22,652

1,145

23,797

Net loss

(9,498)

(9,498)

(730)

(10,228)

Total other comprehensive income (loss)

(1,188)

38

(1,150)

525

(625)

Total comprehensive loss

(1,188)

(9,460)

(10,648)

(205)

(10,853)

Issuance of treasury common shares

2,351

2,351

2,351

Issuance of shares, net of issuance costs of $178

Exercise of options

Other comprehensive income Classification

(111)

(111)

(1,709)

(1,820)

Share-based compensation

225

225

225

Expired options

5,755

(5,755)

Balance as of December 31, 2023

253,882

9,637

95

(249,145)

14,469

(769)

13,700

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash provided from operating activities:

Net loss

$     (10,228)

$ (191,301)

$   (18,518)

Adjustments for non-cash items:

Unrealized gain on changes in fair value of biological assets

(84)

(7,210)

Fair value adjustment on sale of inventory

984

4,342

8,796

Fair value adjustment on warrants, investments, and accounts receivable

(6,955)

(6,000)

(21,638)

Depreciation of property, plant and equipment

644

3,044

3,021

Amortization of intangible assets

1,758

2,343

1,158

Depreciation of right-of-use assets

594

1,944

1,550

Impairment of goodwill

107,854

275

Impairment of property, plant and equipment

2,277

Impairment of intangible assets

7,199

Impairment of right-of-use assets

1,914

Finance income, net

3,019

6,532

1,262

Deferred tax payments (benefit), net

394

(3,004)

278

Share-based payments

225

3,767

7,471

Share based acquisition costs related to business combination

807

Revaluation of other accounts receivable

3,982

Restructuring expenses

8,757

Loss from revaluation of investments

601

1,264

144,867

(4,230)

Changes in non-cash working capital:

Increase (decrease) in trade receivables, net

2,320

6,058

(6,602)

Increase (decrease) in other accounts receivable and advances to suppliers

1,299

3,622

845

Decrease in biological assets, net of fair value adjustments

565

6,412

Increase (decrease) in inventory, net of fair value adjustments

4,771

883

(19,707)

Increase (decrease) in trade payables

(6,098)

11,284

5,573

Changes in employee benefit liabilities, net

(139)

(63)

28

Increase in other accounts payable and accrued expenses

(750)

12,126

2,661

1,403

34,475

(10,790)

Taxes paid

(514)

(681)

(834)

Net cash used in operating activities

(8,075)

(12,640)

(34,372)

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash flows from investing activities:

Purchase of property, plant and equipment

(581)

(1,562)

(4,578)

Proceeds from sales of property, plant and equipment

210

Proceeds from loans receivable

350

7,796

Purchase of intangible assets

(17)

Acquisition of businesses, net of cash acquired

(12,536)

Deconsolidation of subsidiary (see Note 25)

(406)

Investments in financial assets

(13)

Proceeds from sale of investment

319

Proceeds from (investment in) restricted deposits

17

Investments in associates

(601)

(125)

Net cash used in investing activities

(1,182)

(1,533)

(9,012)

Cash provided by financing activities:

Proceeds from issuance of share capital, net of issuance costs

1,688

3,756

28,131

Proceeds from issuance of warrants measured at fair value

6,585

11,222

Proceeds from exercise of warrants

3,682

Proceeds from exercise of options

333

133

Repayment of lease liability

(586)

(1,656)

(633)

Payment of lease liability interest

(63)

(1,429)

(1,347)

Proceeds from loans

5,482

9,636

7,804

Repayment of loans

(4,827)

(4,976)

Interest paid

(1,664)

(902)

(261)

Proceeds from discounted checks

2,802

Net cash provided by financing activities

9,417

4,762

48,731

Effect of foreign exchange on cash and cash equivalents

(796)

(2,043)

(329)

Increase (decrease) in cash and cash equivalents

(636)

(11,454)

5,018

Cash and cash equivalents at beginning of year

2,449

13,903

8,885

Cash and cash equivalents at end of year

$      1,813

$      2,449

$    13,903

Supplemental disclosure of non-cash activities:

Right-of-use asset recognized with corresponding lease liability

$         309

$         613

$      1,678

Conversion of warrant and compensation options into common shares

$                 –

$             –

$         611

Issuance of shares in payment of purchase consideration liability

$                 –

$      3,061

$             –

Issuance of shares in payment of debt settlement to a non-independent director of the company

$      1,061

$             –

$             –

 

 

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